Just after many Wallstreet firms were predicting oil prices to skyrocket passed $130 the jets have started to cool and oil prices are falling. Oil dipped below $100 a barrel this week and the two biggest factors are demand destruction and China’s latest Covid-19 outbreak. In the U.S. the Ukraine war and high gas prices are deteriorating the demand for commodities and demand is beginning to weaken which in turn affects energy prices. Demand will drop by 1.4 million barrels a day according to Rystad Energy. Additionally, the U.S. is a strong dollar is making it hard to purchase oil-backed goods abroad. China’s lockdown in Shanghai drastically reduces global demand and could be a threat in the intermediate future. If Bejing follows suit it could be devastating.

Finsum: Oil investors should watch out for Russia, which is starting to feel the pressure on its economy.

Global turmoil is on the rise, but just as threatening to domestic returns is skyrocketing wages in the U.S. Sure there were great returns last year despite higher wages and inflation, but what stocks are primed to succeed in this current environment? The first is Arcutis Biotherapeutics which has an important drug in stage three clinical trials, which Goldman says could be very profitable. Next is Tricidia another pharma company that has a high buy rating and a potential upside of 126% according to analyst Madhu Kumar of Goldman. Coupang is the final pick which is a South Korean e-commerce retailer. They showed impressively robust revenues when the economy reopened and has great operating leverage according to Eric Cha of GS.

Finsum: These could be potentially good candidates in the tumultuous markets we are seeing currently. 

You know what sounds nice, consistent diversified income with little risk, but the problem is finding those solutions is difficult if not impossible. Model portfolios have popped up in the last decade to tackle this very problem, but there aren’t great options with diversity. One of the biggest reasons is treasury yields are still drastically lower than in the pre-financial crisis era. Nonetheless, there are pretty consistent income options, but they are riskier than ever because regardless of the model equities, high-yield debt, and emerging market debt are all more correlated than they have been in decades which means these funds fail to diversify. The GFC and the covid pandemic put a focus on macro fundamentals that the Greenspan-put eliminated.

Finsum: Income models can come with their risks, particularly as markets are getting more volatile.

Direct indexing seems targeted at high-net-worth individuals. They have huge tax incentives, a decent fee structure, and usually high minimums, but there is just one problem: they don’t know about them. According to a survey by Parametric Portfolio Associates over half of high-net-worth are unfamiliar with direct indexing. This is odd because it's one of the fastest-growing market segments expected to grow at 12% each year over the next half-decade. The survey also finds that advisors that do recommend direct indexing, lean mostly on the tax structure and benefits that they can capitalize on.

Finsum: Investors need to be aware of the benefits of custom indexing, the tax benefits tend to outperform fees, so they can edge out traditional ETFs. 

There has been a mass exodus in the corporate bond market which is making fixed-income funds as attractive as they have been in a while. Outflows started 21 weeks ago and are hitting $28 billion according to Refinitiv Lipper. With investors fleeing this has created even more negative returns on top of inflation and interest rate pressure. Investors willing to hold bonds to completion, particularly in value sectors like banking are getting them at an ultra bargain. One reason we are seeing investors flee corporate bonds is yields have been climbing faster than treasuries but many see interest rate risk already priced in which could be enough to turn around the investment-grade bond market.

Finsum: Value sector bond ETFs could be a smart play, with commodities and financials being major players.